Financial Considerations of Memory Care
Long-Term Care Cost Comparison
The costs of assisted living and memory care are both subject to many of the same variables including geographic location, apartment size, and required services. Beyond that, however, costs are figured a bit differently for the two types of care.
Assisted living communities generally charge a base monthly rate, which covers room and board with two to three meals per day. According to the 2017 Cost of Care Survey, the mean cost in the U.S. for assisted living apartment is $4,560 per month, which can vary significantly by location. Some communities cover housekeeping, laundry and other services in their base rate, while in others, these are optional services–so it is important to get a cost breakdown for every community you may be considering.
Because memory care offers specialized care and nursing services that regular assisted living does not, the cost tends to be higher. Fortunately, there are several options available to help pay for senior care and reduce the out-of-pocket costs. Several are shown below, but for a full analysis, be sure to make an appointment with an Aravilla representative.
Long Term Care Insurance
If you have a long-term care insurance policy or a policy designated for home care, it will likely cover assisted living. Some people also have “facility-only” policies which cover care only in licensed assisted living facilities or skilled nursing facilities.
Many insurance policies are difficult to understand, but knowing your benefits will be very helpful in making sure you get what you have paid for. It is very common for insurance companies to decline payment on the first request. Commonly, you or an advocate at the assisted living community will need to contact the insurance companies personally to discuss issues and obtain approval. Most companies will require that you demonstrate need in at least two areas of ADLs (activities of daily living) to qualify, such as bathing, eating, dressing, transferring from bed to chair, walking and toileting.
Long-term care insurance benefits vary widely depending on the policy. Benefits can range from $1,500 to more than $9,000 per month.
When we think of life insurance benefits, we typically believe the funds are not available until death. However, many life insurance policies can be used to pay for care while the policy holder is still alive. Ask your life insurance agent about cashing out a policy, acceleration, or living benefits.
Typically, the company will buy the policy back for 50 to 75 percent of its value. The rules will be different depending on the company and type of policy. Some policies can only be cashed in if the policyholder is terminally ill; others are much more flexible.
If the company won’t cash it in, you can sell the policy to a third-party company in return for a “life settlement” or “senior settlement,” which is usually 50 to 75 percent of the policy’s face value. After buying the policy, and giving you the percentage, the third-party company continues to pay the premiums until the policyholder dies, at which time the company receives the benefits.
There are also options called “life assurance” benefit or life insurance conversion program. This allows seniors to switch the benefit of a life insurance policy into long-term care payments. Life insurance conversion typically pays between 15 and 50 percent of the value of the policy. Although this is less than a life settlement, it is an option for lesser-value policies that might not qualify for life settlement.
The VA (U.S. Department of Veteran Affairs) can be very generous when taking care of those who served. If you or your loved one is a veteran, you may be eligible for benefits that can be used to pay for residential care. If you have service-related injuries or disabilities, this should be straightforward.
There is another set of benefits known as “Non-Service Connected Improved Pension Benefit with Aide and Attendance” (Aid and Attendance for short) that pays toward the cost of assisted living. This is available to veterans or a surviving spouse who is disabled and whose income is below a certain limit. A veteran must have served at least 90 days on active duty and/or at least one day during wartime. The medical condition doesn’t need to be service related, but you must meet a medical qualification. The information on how much the benefit pays varies, but the average is a maximum benefit of $1,949 a month for married veterans, $1,644 for single veterans and $1,056 for a surviving spouse.
People are often told that they have too many assets to qualify for the program, but are not informed that it is possible to re-allocate assets without being penalized. However, it must be done under strict guidelines to avoid disqualification, so it may be best to do this with the assistance of a professional advisor.
Application is made through the Veteran’s Administration. Along with military discharge papers, applicants need proof of a valid medical condition with a letter stating such from a doctor.
If you own your own home and your spouse still needs a place to live, a reverse mortgage might be just the solution you seek. This allows you to borrow money on the equity you have built up in your home. When the last person is gone from the home, the money must be repaid which usually means selling the home. This is not the best choice for a home that you want to keep in the family.
If you have trouble liquidating assets quickly, short-term bridge loans are becoming more popular. They are usually available in amounts of up to $50,000 and are designed to fund the move to assisted living. They are typically used while waiting for the sale of property, or approval for a pension.
Personal income or savings is the simplest route, but the cost of a month’s rent can quickly use up your savings. You can also cash in personal investment portfolios, like 401k plans or IRAs. Often, paying out of pocket is beyond what many can afford in the long term. However, when all your resources have been exhausted, Medicaid may remain as an option.
If you have a sizable savings but are worried about outliving your resources, you may consider an annuity. When you purchase an annuity, you pay a lump sum to the underwriters and then you will receive regular payments over a specified time period (usually the rest of your life).
This is one way you can stretch out your money and make sure that you will always have some money coming in even if you live longer than you expected. The biggest benefit of an annuity is that even if your purchase premium runs out, you can get more money back than you put in. The underwriters hope to make a profit if you die early. They take the risk that you could live longer. It can be more beneficial for you than just spending your money on the cost of the stay.
Another advantage of an annuity is that it isn’t fully considered an asset by Medicaid when you apply for government assistance. The income (or your monthly payment) from the annuity is counted as a resource, but the larger sum you originally paid for the annuity is not. This can be a complex, so it is wise to have an accountant or financial adviser help you.
About Medicare & Medicaid
Medicare does not pay for the cost of living, room and board, or personal care in an assisted living or memory care. Assistance from Medicare is very limited.
Medicaid is a joint federal government program for older people with low incomes and limited assets. However, administration of the program falls to the individual states, according to the Centers for Medicare and Medicaid Services (CMS), which says “each state sets its own guidelines regarding eligibility and services.” The number of state Medicaid programs paying for assisted living is increasing, and many states also offer home and community-based services to help delay an elder’s placement in a long-term care facility.